European Journal European Journal of of East Asian Studies 13 (2014) 262–283 East Asian Studies brill.com/ejea ‘A Helpless Choice’ Liu Hongsheng’s Zhanghua Company in the Throes of Socialist Transformation Zhao Jin East China Normal University [email protected] Abstract By October 1953, when the Central Committee of the ccp formally decided to embark on the transition to socialism, the Chinese government already had overall control of the national economy. The newly announced ‘General line of transition to socialism’ heralded the incorporation of private industry into the national production plan, but it triggered all kinds of struggles in the course of public–private joint management. This paper takes a micro-level approach based on the study of one private company, Liu Hongsheng’s Zhanghua Woollen Textile Company, from the perspective of the private enterprise itself. Despite its lofty ideals of eliminating private ownership, the Communist Party of China had to accommodate its policy to the reality that the recovery of the national economy required the input of the private economic sector. The paper argues that the capitalists supported the ccp’s policy on the surface, but did their best to seek the development of their own enterprises. The ccp made concessions, but the basic thrust of its strategy remained geared towards the demise of private entrepreneurs. Even an influential ‘national capitalist’ like Liu had to hand over his enterprises. Keywords Shanghai – public–private management – Liu Hongsheng – industry – socialist trans- formation In 1949, when the People’s Republic of China was founded, Mao Zedong upheld the role private entrepreneurs could play in the country: ‘private capitalism ranks second in modern industry, it is a great force that cannot be underesti- © koninklijke brill nv, leiden, 2014 | doi: 10.1163/15700615-01302007 Downloaded from Brill.com09/30/2021 06:42:10PM via free access ‘a helpless choice’ 263 mated’.1 After decades of upheaval and war, Chinese industrialists could look forward to a new spring. Five or six years later, however, private companies were pressed into public–private joint management, a process that eventually led to their elimination as economic actors. The capitalist enterprises that should have played an important role in the modernisation of the country vanished from the historical stage. Research on the process of public–private joint management in the private sector has recently become the focus of a wide range of studies and approaches. A large number of scholars see the policy of public–private joint management after 1953 as a consequence of ideological choices, the impact of the Soviet model and the role of the various mass movements, especially the Three Antis and Five Antis movements after which the Chinese entrepreneurs completely lost faith in the future of private enterprise.2 Others look to the inner workings of the Chinese Communist Party, which impelled the regime towards a Soviet- style system of public ownership through a two-pronged strategy of bringing the capitalists into disrepute while controlling their companies through bank loans and maintaining a stranglehold over raw materials and market outlets. This strategy ultimately forced the business class to accept a sort of voluntary ‘euthanasia’3 in realising that the only way ahead was to ‘consciously and vol- untarily accept socialist transformation’.4 Some scholars point to the impact of agricultural cooperativisation, which had been completed ahead of schedule. Mao Zedong’s speech to business representatives in 1953 and the role of Bei- jing mayor Peng Zhen are also seen as contributory factors.5 The choices and 1 Mao Zedong, ‘Zai zhongguo gongchandang di qi jie zhongyang weiyuan di er ci quanti huiyi shang de baogao’ (Report to the second plenary session of the seventh central committee of the Communist Party of China), 5 March 1949, Zhonghua Renmin Gongheguo Jingji Dang’an Ziliao Xuanbian: 1949–1952, Gongshang tizhi (Economic Profiles of the People’s Republic of China: 1949–1952, Industrial and Commercial Volume) (Beijing: Zhongguo Shehui Kexueyuan Chubanshe, 1993), pp. 3–4. 2 Kuisong Yang, ‘Mao Zedong weishenme fangqi xin minzhuzhuyi—guanyu Eguo moshi de ying- xiang wenti’ (Why did Mao Zedong give up New Democracy? Concerning the issue of the influence of the Soviet model), Jindaishi Yanjiu, Vol. 4 (1997), pp. 136–151. 3 Yongfa Chen, Zhongguo Gongchan Geming Qishi Nian (Seventy Years of Chinese Communist Revolution) (Taipei: Lianjing Chuban Shiye Gongsi, 2001), pp. 605, 641. 4 Yong Gui, Siyou Chanquan de Shehui Jichu: Chengshi Qiye Chanquan de Zhengzhi Chonggou, 1949–1956 (The social basis of private property rights: the political restructuring of property rights of enterprises’ property in cities) (Shanghai: Lixin Kuaiji Chubanshe, 2006). 5 Roderick MacFarquhar and John King Fairbank, The People’s Republic, Part 1: The Emergence of Revolutionary China, 1949–1965 (Cambridge: Cambridge University Press, 1987), pp. 120–121. European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access 264 zhao aspirations of the capitalists may have been related to different political and economic goals, but ultimately they all accepted the demands of the govern- ment and took the road of joint ownership.6 While most studies have adopted a macro-level approach, this paper intends to provide a micro-study based on one specific private company from the per- spective of private enterprise itself. There are several case studies on private factories and stores, but they focus on the concrete implementation of the government’s public–private policy in factories and its effectiveness.7 Little light has been shed on the production process in private enterprises, the senti- ments and reactions of the owners and the complexity of the struggle between the public and private sectors during the negotiations. I chose the Zhanghua Woollen Textile Company because it was a leading company, not just in Shang- hai but also in the whole country. It was established by Liu Hongsheng, a major industrialist, on whom Sherman Cochran and Kai Yiu Chan have produced extensive research. Kai Yiu Chan focused on the internal structure and the development model of Liu’s enterprises in the republican period.8 Although Sherman Cochran touched on the Lius after 1949, he did not examine the Lius’ complicated feelings and their interaction with the communists’ policy and other capitalist entrepreneurs.9 6 Xiaocai Feng, ‘Zhengzhi shengcun yu jingji shengcun: Shanghai shangren ruhe zoushang gongsi heying zhi lu?’ (Political survival and economic survival: how Shanghai businessmen took the road to joint private–public ownership), Zhongguo Dangdaishi Yanjiu, Vol. 2 (2011), pp. 91–138. 7 Ling-ling Lien, ‘Shanghai baihuo gongsi de shehuizhuyi gaizao’ (The socialist transforma- tion of department stores in Shanghai), in Xie Guoxing (ed.), Gaige yu Gaizao: Lengzhan ChuqiLiang’anLiangshi,Tudi,GongshangyeBiange (Reform and Transformation: The Change of Industry and Trade, Land, and Food on the Two Sides of the Straits during the Cold War) (Taipei: Zhongyang Yanjiuyuan Jindaishi Yanjiusuo, 2010), pp. 333–372; Shi Changrui, ‘Yudahua fangzhi ziben jituan shehuizhuyi gaizao yanjiu’ (A study of the socialist transfor- mation of the Yudahua capitalist textile group), ma thesis, Huazhong shifandaxue, 2008; Su Jing, ‘Sulun shachang de shehuizhuyi gaizao yanjiu’ (A study of the socialist transforma- tion of the Sulun filature), ma thesis, Suzhou daxue, 2010; Wang Zuomao, ‘Guojia quanli yu gongsi heying. Yi Yudahua fangzhi ziben jituan wei zhongxin yanjiu’ (State management and public–private management. A study based on the Yudahua capitalist textile group), ma the- sis, Wuhan ligong daxue zhengzhi xingzheng xueyuan, 2006. 8 Kai Yiu Chan, Business Expansion and Structural Change in Pre-War China. Liu Hongsheng and His Enterprises, 1920–1937 (Hong Kong: Hong Kong University Press, 2006). 9 Sherman, Xie Zhengguang Cochran, The Lius of Shanghai (Cambridge, ma: Harvard Univer- sity Press, 2013). European Journal of East Asian Studies 13 (2014) 262–283 Downloaded from Brill.com09/30/2021 06:42:10PM via free access ‘a helpless choice’ 265 Incorporating private industry and commerce into the state-owned econ- omy and eradicating private ownership were the ultimate choice of the com- munist leadership. Private industry and commerce were bound to be elimi- nated. However, the ccp’s policy followed a complicated process. When the new regime took power in 1949, it did not take measures to reform the owner- ship system immediately. On the contrary, it allowed and even supported its existence and development. In 1952, when the Five Antis Campaign hit the capitalists for the first time, the Communist Party seems to have altered its strategy. Yet, although the campaign served ulterior motives, the ccp realised that despite its lofty ideal of eliminating private ownership, it had to admit that the recovery of the national economy required the contribution of the private sector. The shifting policy precisely reflected the contradictions of the ccp between political objectives and economic reality. The struggle between the ccp’s mission of transforming the private economy and the attempts of enterprises to survive infused the course of establishing public–private joint management. This paper will attempt to tackle the following issues: what was the precise nature of the conditions of production and operation of the company before public–private management came into force? In what ways did business own- ers picture the future of their enterprises? What were the earliest stages of public–private partnership from the perspective of private business? In partic- ular, did Liu, as a major national capitalist and a member of the National United Front, and his Zhanghua Woollen Textile Company receive any special consid- eration or treatment from the authorities? The answers to these questions will provide a better understanding of the process of public–private partnership policy. Liu Hongsheng and the New Regime Liu Hongsheng (1888–1956) was born in Shanghai, but his family hailed from Ningbo.